GUANGZHOU - US Treasury Secretary Janet Yellen said on April 6 that she and Chinese Vice-Premier He Lifeng have agreed to launch exchanges on balanced economic growth, an effort partly aimed at addressing US concerns about China’s excess manufacturing capacity.

After two days of economic talks in China’s southern export hub of Guangzhou, Dr Yellen said the two of them have also agreed to start a forum to cooperate on anti-money laundering efforts in their respective financial systems.

The exchanges “will facilitate a discussion around macroeconomic imbalances, including their connection to overcapacity, and I intend to use the opportunity to advocate a level playing field for American workers and firms”, Dr Yellen said in a statement released at the conclusion of the talks.

She characterised the discussions as productive and frank. 

Coming into her four-day visit to China, her top priority was to try to persuade Chinese officials to rein in excess production capacity for electric vehicles (EVs), solar panels and other clean energy technology that is threatening competing companies in the US and other countries.

Chinese state media pushed back on her excess capacity arguments, calling them a “pretext” for protectionist US policies.

Such comments seek to undermine China’s domestic growth and international cooperation, and Washington should focus on fostering innovation and competitiveness within its own borders instead of resorting to “fearmongering”, state news agency Xinhua said in an editorial late on April 5.

Dr Yellen, Mr He and their teams held more than 4½ hours worth of meetings on April 6 on a range of economic topics.

They discussed the excess capacity issue for over two hours, Dr Yellen told reporters on the afternoon of April 6.

“I think the Chinese realise how concerned we are about the implications of their industrial strategy, for the United States, for the potential to flood our markets with exports that make it difficult for American firms to compete,” Dr Yellen said. “And then other countries have the same concern.”

She said that the forum would provide a “structured” way to discuss a complicated issue, but that it would take some time to resolve.

“I think they have heard that this is an important issue to us. It’s going to be critical to our bilateral relationship going forward and to China’s relationship with other countries that are important.”

She added that Chinese officials were “more confident” about the economy after setting policies to address issues in the property sector and on local government debt.

In a statement on April 6, Xinhua said the discussions on economic relations and global challenges between Mr He and Dr Yellen were “candid, pragmatic and constructive”, confirming that they had agreed to further discuss balanced growth and financial stability.

Beijing also expressed serious concerns about US economic and trade restrictions on China and made a full response to the production capacity issue during the talks, it added.

Dr Yellen also warned that Chinese companies faced “significant consequences” if they provided material support to Russia’s war effort.

The Chinese side emphasised that their policy was not to provide such support, and did not want this to be a bilateral issue, she said.

In an editorial on April 6, Xinhua said suppressing China’s EV-related industries would not help the US grow its own, adding that it hoped more headway could be made during Dr Yellen’s visit to break down barriers hindering mutually beneficial cooperation.

Some trade experts see increased US criticism of China’s production-focused, subsidy- and debt-driven economic model as a step towards raising US tariffs on Chinese EVs and clean energy goods.

Dr Yellen has shied away from raising new trade threats, but said during her journey to Guangzhou that she would not rule out more actions to protect a fledgling American supply chain for EVs, batteries, solar power and other goods from cut-price Chinese imports.

While the Treasury does not expect a major shift in Chinese policy after Dr Yellen’s visit, US officials believe it was important to explain the economic risks that over-investment in some sectors and weak consumer demand present to both China and its trading partners.

Dr Yellen said on April 5 that her trip was partly aimed at cementing US-China ties to “withstand shocks and challenging circumstances”.

She will travel on April 6 to Beijing, where she will meet officials including Premier Li Qiang, Finance Minister Lan Foan and People's Bank of China Governor Pan Gongsheng through April 8. REUTERS